Whisper it, but the EU’s climate strategy is working

First it was carbon targets and emissions trading, now it's aviation and shipping levies - the EU's climate strategy is having a global impact

The contradiction is striking. Just as the European Union faces arguably the greatest crisis since its inception, leaving it visibly diminished on the world stage, the bloc's ambitious and influential climate change strategy has never looked more powerful.

This contrast was laid bare at last year's Durban Climate Summit where EU environment ministers were widely praised for the progressive and constructive role they played in delivering a new international agreement, at precisely the same time as Prime Ministers and Presidents were engaged in the latest round of desperate through-the-night meetings attempting to save the eurozone from collapse.

It is also apparent in the bold response of the European Commission to the US and China's threats of a trade war over its plans to price carbon emissions from airlines, effectively telling one of the countries that holds a huge stake in the EU's debt mountain to stop bleating.

The EU's climate strategy has always boiled down to the simple concept of the demonstration economy. Provide a working example of how low carbon policies and technologies can not only operate effectively, but also generate broad economic and environmental benefits, and the hope is that other nations and regions will follow suit.

This strategy is now being vindicated. The EU set binding emissions and renewable energy targets and now countless countries have followed in its footsteps. The EU introduced a carbon pricing cap-and-trade scheme, and now New Zealand and Australia have followed suit, with Japan, South Korea and, most importantly, China all promising to do likewise over the next few years.

In the past this strategy operated somewhat under the radar, with critics arguing that the EU was always willing to water down aspects of its strategy that threatened carbon intensive businesses or trade partners. The demonstration economy approach worked, but it was never more than quietly effective, with the EU welcoming countries that did want to adopt climate policies while rarely applying pressure on those who didn't.

But the on-going row over the decision to include airlines in the EU emissions trading scheme (ETS) has changed all that, emboldening the Commission at the same time as demonstrating that a more vocal and unyielding approach can bear dividends.

A couple of weeks ago I was invited onto CNN's Quest Means Business show to discuss the Moscow meeting of a group of around 20 countries opposed to the EU plans, which culminated in threats of retaliatory measures. Like most TV news commentators, I scrambled to do some background research so as to look as informed and well-connected as possible, and what became very quickly apparent was that for once we are looking at a trade war where the EU holds all the ammunition.

The threatened "counter measures" put forward by the group of countries might look threatening on paper, but in practice it would require countries to cut off their nose to spite their face, and all over a policy that at most adds €4 to the price of a long haul ticket.

Any move by China, the US, or Russia to impose punitive levies on European airlines or ground flights to and from the bloc might damage the EU airlines and by extension Europe's economy, but it would also damage their own economies and carriers. Neither the US Congress, the Chinese Politburo or Moscow's Kremlin are so dysfunctional as to want to ground intercontinental flights over an increase in ticket prices that is smaller than the cost of a cup of coffee. After all, regardless of its current difficulties the EU remains one of the world's largest and most prosperous single markets.

The apparent decision by China to halt orders of a new fleet of Airbus 380s in retaliation is more serious, but interestingly Chinese officials were quick to deny that the trade spat was behind the decision, while hopes remain the row can be resolved. Similarly, talk of China banning its airlines from taking part in the ETS, have so far proved to be just that: talk. According to the EU, there has been no formal notification from any country that it intends to force its airlines to break the law.

Of all the "counter measures" proposed by the Moscow group the most likely are the threats to lodge formal complaints with the International Civil Aviation Organisation (ICAO) and the World Trade Organisation (WTO). But this is precisely what the EU wants. It has always said that it will drop aviation from the emissions trading scheme as soon as a comparable international mechanism for tackling emissions from the sector is in place. It wants the negotiations to accelerate at the ICAO and the UN, and deliver an international carbon pricing scheme for the sector.

Of course, trade wars have a nasty habit of escalating along irrational lines and the situation could yet detiorate fast. But by playing hard ball the EU has forced its international opponents and, just as importantly, the airlines themselves to agree that what is required to tackle global aviation emissions is an international carbon pricing mechanism. The only difference is that non-EU countries and the airlines want to see the EU scheme suspended while this new mechanism is negotiated, something the EU will not concede on the grounds that it is the current emissions charges that are forcing everyone to the table. The most likely course of action remains months of sabre-rattling on both sides followed by the resumption of international negotiations to deliver a global emissions pricing mechanism, probably some time around 2020.

It might be hard to believe, but Brussels is no longer simply encouraging countries to adopt progressive climate policies through the strength of its example, it is also strong arming them into doing so through the strength of its negotiating tactics. It is also so emboldened that talk is already turning to pulling off exactly the same trick with shipping emissions, reinvigorating the stalled international negotiations to tackle the sector's emissions by pricing emissions in EU waters, forcing others to comply with charges they don't want to face or come back to the table and deliver a global solution.

Inevitably, not everything in the Brussel's garden is rosy. Poland's decision last week to veto efforts to agree emissions targets for the post 2020 period represented a blow to the EU's plans to up the pace of the low carbon transition. But even here it was encouraging to see Poland isolated, with every other country calling for more ambitious targets for the 2020s and a general strengthening of key policies such as the ETS.

European leaders might be deeply ambivalent about the EU at the moment given its on-going economic travails, but the tangible progress delivered by the bloc's climate strategy provides a powerful reminder of what can be achieved when European countries both act together and find the courage to punch their weight.